Pentagon struggles with high cost of health care

WASHINGTON (AP) — The loud, insistent calls in Washington to rein in the rising costs of Social Security and Medicare ignore a major and expensive entitlement program — the military's health care system.

Despite dire warnings from three defense secretaries about the uncontrollable cost, Congress has repeatedly rebuffed Pentagon efforts to establish higher out-of-pocket fees and enrollment costs for military family and retiree health care as an initial step in addressing a harsh fiscal reality. The cost of military health care has almost tripled since 2001, from $19 billion to $53 billion in 2012, and stands at 10 percent of the entire defense budget.

Even more daunting, the Congressional Budget Office estimates that military health care costs could reach $65 billion by 2017 and $95 billion by 2030.

On Wednesday, when President Barack Obama submits his fiscal 2014 budget, the Pentagon blueprint is expected to include several congressionally unpopular proposals — requests for two rounds of domestic base closings in 2015 and 2017, a pay raise of only 1 percent for military personnel and a revival of last year's plan to increase health care fees and implement new ones, according to several defense analysts.

Defense Secretary Chuck Hagel insisted this past week that the military has no choice as it faces a $487 billion reduction in projected spending over the next decade and possibly tens of billions more as tea partyers and other fiscal conservatives embrace automatic spending cuts as the best means to reduce the government's trillion-dollar deficit.

The greatest fiscal threat to the military is not declining budgets, Hagel warned, but rather "the growing imbalance in where that money is being spent internally." In other words, money dedicated to health care or benefits is money that's not spent on preparing troops for battle or pilots for missions.

Hagel echoed his predecessors, Leon Panetta, who said personnel costs had put the Pentagon on an "unsustainable course," and former Pentagon chief Robert Gates, who bluntly said in 2009 that "health care is eating the department alive."

In his speech last past week, Hagel quoted retired Adm. Gary Roughead, the former Navy chief, who offered a devastating assessment of the future Pentagon.

Without changes, Roughead said, the department could be transformed from "an agency protecting the nation to an agency administering benefit programs, capable of buying only limited quantities of irrelevant and overpriced equipment."

The military's health care program, known as TRICARE, provides health coverage to nearly 10 million active duty personnel, retirees, reservists and their families. Currently, retirees and their dependents outnumber active duty members and their families — 5.5 million to 3.3 million.

Powerful veterans groups, retired military officer associations and other opponents of shifting more costs to beneficiaries argue that members of the armed forces make extraordinary sacrifices and endure hardships unique to the services, ones even more pronounced after a decade-plus of wars in Iraq and Afghanistan.

Members of the military have faced repeated deployments, had to uproot their families for constant moves and deal with limits on buying a home or a spouse establishing a career because of their transient life. Retirement pay and low health care costs are vital to attracting members of the all-volunteer military.

"If you don't take care of people, they're not going to enlist, they're not going to re-enlist," said Joe Davis, a spokesman for the Veterans of Foreign Wars.

Resistance in Congress to health care changes was evident in the recently passed spending bill to keep the government running through Sept. 30. Tucked into the sweeping bill was a single provision stating emphatically that "none of the funds made available by this act may be used by the secretary of defense to implement an enrollment fee for the TRICARE for Life program."

The program provides no-fee supplemental insurance to retirees 65 and older who are eligible for Medicare. The Pentagon repeatedly has pushed for establishment of a fee, only to face congressional opposition.

The provision in the spending bill blocking an enrollment fee had widespread support among Republicans and Democrats, according to congressional aides. The Pentagon, nonetheless, is expected to ask again in the 2014 budget for an enrollment fee.

The department also is likely to seek increases in fees and deductibles for working-age retirees and try again to peg increases in them to rising costs as measured by the national health care expenditure index produced by the Centers for Medicare and Medicaid Services. That index rose 4.2 percent in 2012 and is projected rise by 3.8 percent this year.

In recent years, Congress has agreed to tie any future increases to the typically smaller percentage increase in military retirees' cost-of-living adjustment, which this year is 1.7 percent.

Either way, a military retiree under age 65 and their family members pay a far smaller annual enrollment fee than the average federal worker or civilian — $230 a year for an individual, $460 for a family. There is no deductible.

Lawmakers' other response was to establish the Military Compensation and Retirement Modernization Commission to study the issue of benefits and offer recommendations on how the Pentagon can address the problem. The commission was created in this year's defense authorization bill.

"Nobody wants to touch it because people are confused about who it impacts," said Lawrence Korb, a former assistant defense secretary and now a senior fellow at the liberal-leaning Center for American Progress. "It's not going to impact people on active duty. It's not going to impact veterans because they're taken care of by the VA. Basically (it's) working-age retirees."

Korb said he wished Hagel has been more explicit in his warning about the impact of benefit costs.

"He did lay it out that we're going to have to do something or we're going to end up like General Motors and spending everything on people not working for us anymore."

Gordon Adams, a professor at American University who was a senior official at the Office of Management and Budget, said limited savings in the short term from changes in retirement rules or other benefits present a challenge in making the case for change.

"The savings are downstream, but you only get downstream if you get in the boat now," Adams said. "Otherwise you never get downstream, you're just waiting at the dock all the time because you don't think it'll save you money up front."